Latest news with #YardeniResearch
CNBC
3 days ago
- Business
- CNBC
Everyone is talking 'TACO' trade. Investors say don't count on Trump chickening out
"Trump Always Chickens Out," or TACO, is a gibe that has ruffled the U.S. president's feathers, and investors have, by now, seen it happening enough times to know his playbook. The phrase, coined by a Financial Times columnist, refers to Donald Trump's pattern of threatening steep tariffs that rattle markets, only to ease or postpone them after a sharp market sell-off, prompting a recovery. "Trump's style in negotiating deals is he huffs and he puffs, but he doesn't blow the house down," Ed Yardeni, president of Yardeni Research, told CNBC. In February, Trump announced a 25% tariff on imports from Canada and Mexico, before swiftly putting them on a 30-day pause just days later. And in early April, Trump slapped tariffs on more than 180 countries while escalating a tariff tit-for-tat with China, sending shock waves across financial markets. Global equities had a bloodbath in the days that followed. The U.S. benchmark S & P 500 fell about 12% between April 2 and April 8, and the MSCI world index excluding the U.S. fell over 8% in the same period. U.S. government bonds had a sell-off too. Yields on the benchmark 10-year yield jumped 10 basis points between April 2 and April 8, and the 20-year yield rose around 20 basis points, according to data on LSEG. Three stages of market reactions Then, on April 9, the president surprised markets yet again by cutting tariffs to 10% for nearly all U.S. trading partners for 90 days, leading to one of the biggest rallies on Wall Street . More recently, Trump announced 50% tariffs on goods from the European Union last Friday, sending investors trembling during the long holiday weekend, before walking back on the decision Sunday evening. U.S. equities rallied the following Tuesday, the week's first day of trading after a holiday. Trump has realized that the stock and bond markets can have a powerful influence on his decision-making, Yardeni said, adding that the bond market had "forced" the president's hand to postpone "reciprocal tariffs" by 90 days. "He bullies, he threatens. But there are checks and balances to what he can do as President," Yardeni said. The U.S. federal court ruled on Wednesday that Trump overstepped his legal authority in imposing "reciprocal" tariffs. There are three distinct stages of market reactions when it comes to TACO, said Aberdeen Investments' Ray Sharma-Ong, head of multi-asset investment solutions in Southeast Asia. First, an initial aggressive Trump policy rollout is accompanied by a sharp risk-off sentiment. That's followed by a policy walkback and a consequent rebound in equities. The last stage is a "post-walkback ambiguity," in which investors adopt a wait-and-see approach after the initial market rebound, attempting to price in Trump's next move, Sharma-Ong said. Trust issues with Trump That uncertainty makes TACO a problematic bet, market watchers said. "One day tariffs go up, the next they're 'negotiable.' It's very difficult to build conviction-based positions when the policy direction keeps shifting," said Brian Arcese, portfolio manager at Foord Asset Management. Trump's approach is also denting traders' confidence in U.S. policy and U.S. assets, said UBP's head of equity research in Asia, Calder Kieran. That was the case in April, when a U.S. asset exodus occurred, leading to a weakening of the dollar and a spike in U.S. Treasury yields. While those pullbacks create attractive opportunities to allocate or enter a position in certain stocks, investors reiterated that they are sticking with the fundamentals. "There certainly is a pattern here but I would not always count on the 'Trump put' to happen," said Kai Wang, Morningstar's Asia equity market strategist, suggesting that investors stick with high-quality stocks with less drawdown during bear markets. TACO is essentially a punchier version of the Wall Street coinage, "Trump put" — in other words, when markets start to fall and Trump acts to turn them around. "It may be dangerous to believe that a Trump put is set in stone," said Nomura's head of global macro research, Rob Subbaraman. That's because his administration's negotiating power weakens as markets and foreign governments increasingly believe in the Trump put, making it a less viable strategy for him to employ, Subbaraman explained. Billy Leung, investment strategist at Global X, is, likewise, skeptical about the long-term viability of the Trump put. "The market's reaction to tariffs has evolved. It's not just a fade-the-headline play anymore. The Trump put has weakened," he said. Investors should therefore move away from import-dependent names and toward companies that are actively rerouting supply chains and accelerating investment in reshoring sensitive sectors, Leung added. "Corporates are not waiting for clarity," he said.
CNBC
5 days ago
- Business
- CNBC
My underlying bullishness remains intact, says Ed Yardeni
Ed Yardeni, Yardeni Research president, joins 'Squawk Box' to discuss the latest market trends, state of the economy, impact of the administration's policy uncertainty, what to make of the recent bond market volatility, and more.
Bloomberg
23-05-2025
- Business
- Bloomberg
Ed Yardeni Says It's Not as Bad as You Think
Think it's all over for US markets? Think they're finally going to sink under high valuations, inflated expectations and now a nervous bond market? Maybe think again, says Ed Yardeni of the eponymous firm Yardeni Research, who joins this week's Merryn Talks Money.
Yahoo
15-05-2025
- Business
- Yahoo
Inside the historic $8 trillion market comeback
In early April, Wall Street threw a temper tantrum that would make a toddler proud. Fearing President Donald Trump's chaotic trade war would ignite a global recession, investors scrambled to dump US assets. The rare simultaneous selloff of both stocks and bonds reflected a serious loss of confidence in White House policy. Then Trump changed his tune. The president paused so-called 'reciprocal tariffs' for 90 days and later slashed tariffs on China, though many items still face higher tariffs than before the Trump administration. US stocks reversed course, too, setting off a historic rally on Wall Street in the past month. The S&P 500 has now fully erased the year's losses and gained nearly $8 trillion in market value since its April 8 lows. It's a remarkable comeback that underscores palpable relief among investors and easing recession fears since Trump's stunning reversal. 'The markets had a tantrum and stomped their collective feet and got what they wanted: Trump to back off,' Ed Yardeni, president of investment advisory Yardeni Research, told CNN in a phone interview. 'Trump realized he was toying around with liquid nitroglycerine and that it was time to back off.' The early 2025 selloff was breathtaking in its speed and intensity. It took just 22 days for the S&P 500 to close in correction territory, a 10% drop from its record highs in November — a fraction of the time it normally takes to get a correction, according to CFRA Research. The S&P 500 narrowly avoided plunging into a bear market. 'It was a free-fall moment,' said Kevin Gordon, senior investment strategist at Charles Schwab. 'Investor sentiment got to panic levels.' The recovery has been just as swift, the fastest since 1982. It took 25 trading days to go to positive territory from down 15% on the year, according to Bespoke Investment Group. In times of gloomy sentiment, investors might spark speedy rebounds when they finally see a situation change. 'Investors think the worst is likely over and that the reason for the panic has largely been undone,' said Sam Stovall, chief investment strategist at CFRA Research. The whipsaw action in markets underscores how hard it is for even the smartest minds on Wall Street to time markets. And why Nathan Rothschild famously said, 'The time to buy is when there's blood in the streets.' The CNN Fear & Greed Index of market sentiment signaled 'extreme fear' among investors in April, crashing to three on a scale of one to 100. The gauge has since completely rebounded and is now in 'greed' territory (and heading toward 'extreme greed'). The tech sector has largely led the rally after the Trump administration's decision to exclude smartphones and other electronics from country-specific tariffs. Apple (AAPL) and Amazon (AMZN) stocks have surged more than 20% apiece since the April 8 low. Nvidia (NVDA) has spiked more than 40%. But the upswing goes broader than tech. Consumer discretionary, industrials, communication services and financials have all rallied on Wall Street in the past month. Each time tariffs have been dialed back, forecasters have cut their odds of a recession. The chance of a US recession is now less than 50%, according to JPMorgan Chase economists' forecast, down from 60% in early April before Trump's 90-day pause on country-specific tariffs. Goldman Sachs now sees a 35% chance of a recession, down from 45% before the US-China breakthrough on trade. And recession chances on prediction platform Polymarket have plunged from 66% to 39%. 'There was a tremendous amount of anxiety about Trump's tariffs causing turmoil and uncertainty and increasing the likelihood of a recession, not just in the US but on a global basis,' Yardeni said, adding that 'Trump couldn't afford to let this issue fester.' And the odds of a recession don't have to be zero for investors to pile back into stocks. 'If zero is knowing nothing and 10 is knowing everything, Wall Street nibbles at 3 and does full-blown buying at 5,' said Stovall. Of course, the US economy is not out of danger. US tariffs have still skyrocketed, just not as high as a few weeks ago. The average effective tariff rate stands at 17.8%, the highest since 1934, according to The Budget Lab at Yale. US tariffs on China are no longer at 145%, but they're still elevated at 30%. That's low enough to unfreeze trade but high enough to still cause price increases. And no one knows exactly how those still-high tariffs will hit the US economy – not even the Federal Reserve. 'This is still relatively extreme trade policy,' said Schwab's Gordon. The White House argues the economic damage will be minimal. Many economists expect a burst of inflation and job loss, though the magnitude is very much up for debate. The rapid recovery has spurred other investor concerns, and some worry the stock market rally is overextended. 'The market has raced from oversold to overbought in record time,' Mark Hackett, chief market strategist at Nationwide, wrote in a note on Wednesday. 'That limits near-term upside unless we see a clear reacceleration in growth.' Hackett said that without stronger growth and earnings, it will be difficult for US stocks to break out to new highs. UBS warned on Wednesday that economic data is 'poised to soften' in the coming months and that, in turn, US stocks could face a 'modest headwind.' The bank has downgraded its stance on US stocks from 'attractive' to 'neutral,' cautioning that much of the good news has already been priced in and challenging news is likely on the way. And a powerful rally does not guarantee the worst is over. CFRA's Stovall notes that in two-thirds of all bear markets since World War II, the S&P 500 ultimately made even lower lows after recovering from double-digit percentage declines. 'There is still an awful lot of uncertainty out there. We have to wait and see if this rally has legs,' Stovall said. The biggest X-factor is Trump himself and his evolving trade agenda. Markets remain one all-caps Truth Social post away from either a meltdown or a ferocious rally. 'This was a manufactured correction,' said Stovall, 'and it could be remanufactured if the president wants to change his mind about things.' Sign in to access your portfolio
CNN
15-05-2025
- Business
- CNN
Inside the historic $8 trillion market comeback
In early April, Wall Street threw a temper tantrum that would make a toddler proud. Fearing President Donald Trump's chaotic trade war would ignite a global recession, investors scrambled to dump US assets. The rare simultaneous selloff of both stocks and bonds reflected a serious loss of confidence in White House policy. Then Trump changed his tune. The president paused so-called 'reciprocal tariffs' for 90 days and later slashed tariffs on China, though many items still face higher tariffs than before the Trump administration. US stocks reversed course, too, setting off a historic rally on Wall Street in the past month. The S&P 500 has now fully erased the year's losses and gained nearly $8 trillion in market value since its April 8 lows. It's a remarkable comeback that underscores palpable relief among investors and easing recession fears since Trump's stunning reversal. 'The markets had a tantrum and stomped their collective feet and got what they wanted: Trump to back off,' Ed Yardeni, president of investment advisory Yardeni Research, told CNN in a phone interview. 'Trump realized he was toying around with liquid nitroglycerine and that it was time to back off.' The early 2025 selloff was breathtaking in its speed and intensity. It took just 22 days for the S&P 500 to close in correction territory, a 10% drop from its record highs in November — a fraction of the time it normally takes to get a correction, according to CFRA Research. The S&P 500 narrowly avoided plunging into a bear market. 'It was a free-fall moment,' said Kevin Gordon, senior investment strategist at Charles Schwab. 'Investor sentiment got to panic levels.' The recovery has been just as swift, the fastest since 1982. It took 25 trading days to go to positive territory from down 15% on the year, according to Bespoke Investment Group. In times of gloomy sentiment, investors might spark speedy rebounds when they finally see a situation change. 'Investors think the worst is likely over and that the reason for the panic has largely been undone,' said Sam Stovall, chief investment strategist at CFRA Research. The whipsaw action in markets underscores how hard it is for even the smartest minds on Wall Street to time markets. And why Nathan Rothschild famously said, 'The time to buy is when there's blood in the streets.' The CNN Fear & Greed Index of market sentiment signaled 'extreme fear' among investors in April, crashing to three on a scale of one to 100. The gauge has since completely rebounded and is now in 'greed' territory (and heading toward 'extreme greed'). The tech sector has largely led the rally after the Trump administration's decision to exclude smartphones and other electronics from country-specific tariffs. Apple (AAPL) and Amazon (AMZN) stocks have surged more than 20% apiece since the April 8 low. Nvidia (NVDA) has spiked more than 40%. But the upswing goes broader than tech. Consumer discretionary, industrials, communication services and financials have all rallied on Wall Street in the past month. Each time tariffs have been dialed back, forecasters have cut their odds of a recession. The chance of a US recession is now less than 50%, according to JPMorgan Chase economists' forecast, down from 60% in early April before Trump's 90-day pause on country-specific tariffs. Goldman Sachs now sees a 35% chance of a recession, down from 45% before the US-China breakthrough on trade. And recession chances on prediction platform Polymarket have plunged from 66% to 39%. 'There was a tremendous amount of anxiety about Trump's tariffs causing turmoil and uncertainty and increasing the likelihood of a recession, not just in the US but on a global basis,' Yardeni said, adding that 'Trump couldn't afford to let this issue fester.' And the odds of a recession don't have to be zero for investors to pile back into stocks. 'If zero is knowing nothing and 10 is knowing everything, Wall Street nibbles at 3 and does full-blown buying at 5,' said Stovall. Of course, the US economy is not out of danger. US tariffs have still skyrocketed, just not as high as a few weeks ago. The average effective tariff rate stands at 17.8%, the highest since 1934, according to The Budget Lab at Yale. US tariffs on China are no longer at 145%, but they're still elevated at 30%. That's low enough to unfreeze trade but high enough to still cause price increases. And no one knows exactly how those still-high tariffs will hit the US economy – not even the Federal Reserve. 'This is still relatively extreme trade policy,' said Schwab's Gordon. The White House argues the economic damage will be minimal. Many economists expect a burst of inflation and job loss, though the magnitude is very much up for debate. The rapid recovery has spurred other investor concerns, and some worry the stock market rally is overextended. 'The market has raced from oversold to overbought in record time,' Mark Hackett, chief market strategist at Nationwide, wrote in a note on Wednesday. 'That limits near-term upside unless we see a clear reacceleration in growth.' Hackett said that without stronger growth and earnings, it will be difficult for US stocks to break out to new highs. UBS warned on Wednesday that economic data is 'poised to soften' in the coming months and that, in turn, US stocks could face a 'modest headwind.' The bank has downgraded its stance on US stocks from 'attractive' to 'neutral,' cautioning that much of the good news has already been priced in and challenging news is likely on the way. And a powerful rally does not guarantee the worst is over. CFRA's Stovall notes that in two-thirds of all bear markets since World War II, the S&P 500 ultimately made even lower lows after recovering from double-digit percentage declines. 'There is still an awful lot of uncertainty out there. We have to wait and see if this rally has legs,' Stovall said. The biggest X-factor is Trump himself and his evolving trade agenda. Markets remain one all-caps Truth Social post away from either a meltdown or a ferocious rally. 'This was a manufactured correction,' said Stovall, 'and it could be remanufactured if the president wants to change his mind about things.'
